Myths About Medicare

Medicare is Free: Arguably one of the biggest Medicare misconceptions is that since it's a critically important social program, it's free. In reality, though some aspects of the program may be offered "free," retirees are expected cover certain expenses on their own.

For example, Part A, otherwise known as hospital insurance, has no premium attached if you've earned 40 work credits throughout your lifetime. However, Medicare Part B (outpatient services) has a standard premium of $144.60 for 2020. Part D, or prescription drug plans, also requires a monthly premium. 

On top of premiums, consumers could be responsible for deductibles and out-of-pocket costs. There are no annual out-of-pocket limits with original Medicare, meaning that retirees are often responsible for about 20% of their medical expenses. Today, on average, the estimates for the out-of-pocket expenses will be $142,500 over a lifetime. It is estimated that the average couple will need $285,000 in today's dollars for medical expenses in retirement, excluding long-term care.There are ways to minimize these out-of-pocket expenses with either a Medicare Supplement Plan also known as a Medigap Plan with a Part D Prescription Drug Plan or a Medicare Advantage Plan also known as Part C. 

The truth is Medicare covers most basic healthcare needs. It covers hospital stays, lab tests, doctor visits, same-day surgery, and preventive services. It also covers durable medical equipment, some home health services, short-term skilled nursing care, and hospice. It doesn’t cover long-term care. And people are often surprised to find out it doesn’t cover most dental care, vision care, hearing services, prescription drugs, or care outside of the United States. You need additional insurance to cover these needs.

What Medicare doesn't offer coverage for is standard dental, vision, hearing care, or long term care. If you're interested in these services, you may want to consider an all-encompassing Medicare Advantage plan which does not include long term care and requires a separate policy from a private insurer which you can also purchase the other services separately. 

In total, there are 10 services that Medicare surprisingly doesn't cover. In addition to the four mentioned above, out-of-country medical care, most cosmetic surgery, and certain types of diabetes supplies aren't covered by Part A or Part B. 

Medicare Coverage Is Automatic When You Turn 65: This is another myth where the truth is yes and no. Enrollment in Parts A and B is automatic if you’re already getting Social Security or Railroad Retirement Board (RRB) benefits. You don’t need to do anything. You’ll get a ‘Welcome to Medicare’ packet three months before your 65th birthday. However, if you aren’t getting these benefits at least four months before you turn 65, you have to actively enroll at that time. Enrollment in Part D, Medigap, and Medicare Advantage plans is voluntary.

I Can Enroll Anytime I Want: Medicare is designed to provide significant financial assistance during your golden years, but there are some restrictions, including when you're allowed to enroll. 

During your initial enrollment period (IEP), you're eligible to enroll during the three months prior to your 65th birthday, the month you turn 65, and the three months following the month you turn 65. If you miss this IEP, you'll need to wait to enroll until the next enrollment period.

For those of you who aren't within your IEP, the standard enrollment period for Medicare or Medicare Advantage plans is between Oct. 15 and Dec. 7. The reasons these dates are consistent from one year to the next has to do with giving private insurers covering Part D time to get their paperwork in order prior to the Jan. 1 coverage start date.

Furthermore, Medicare Advantage members have an opportunity to dis-enroll and opt into original Medicare between Jan. 1 and March. 31. But note that this is a one-way street since original Medicare members may not dis-enroll and opt into a Medicare Advantage plan during this time period.

Everyone Pays The Same For Medicare: Medicare may offer the same benefits for everyone, but that doesn't mean everyone pays the same price for medical care. Your work and earnings history can dictate how much you'll pay for Medicare.

For example, if you haven't earned 40 work credits over your lifetime, Part A isn't free. If you have 39 or fewer work credits you could owe up to $411 per month for Part A. For what it's worth, the vast majority of retirees receive Part A without paying a premium.

However, the biggest differences can be seen in Part B and Part D premiums between higher-income individuals and everyone else. If your individual adjusted gross income is below $87,000, or $174,000 as a couple, you'll pay the standard Part B and Part D premium. But if you earn more than these income thresholds, you'll pay a surcharge for your medical care. Part B monthly expenses can be as high as $491.60 for individuals earning more than $500,000 in 2018 and couples tipping the scales at $750,000 or more in income. Part D monthly surcharges range from $12.20 a month to as high as $76.40 a month on top of your plan premium for high income people.

Medicare coverage is automatic when you turn 65: This is another myth where the truth is yes and no. Enrollment in Parts A and B is automatic if you’re already getting Social Security or Railroad Retirement Board (RRB) benefits. You don’t need to do anything. You’ll get a ‘Welcome to Medicare’ packet three months before your 65th birthday. However, if you aren’t getting these benefits at least four months before you turn 65, you have to actively enroll at that time. Enrollment in Part D, Medigap, and Medicare Advantage plans is voluntary.